UPDATE 2-Mexico's Pemex declares Ramones II natgas pipeline tender void

Tue Oct 15, 2013 4:41pm EDT

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By David Alire Garcia

MEXICO CITY Oct 15 (Reuters) - State oil and gas monopoly Pemex on Tuesday declared the tender void for the second phase of Mexico's biggest natural gas pipeline project after only one bidder made an offer on the $1.8 billion project.

Pemex's gas unit PGPB said the bid did not comply with the project's technical or economic specifications, which now casts doubt on Mexico's future supplies of cheap natural gas.

Shortly after declaring the tender void, Pemex said in a statement that the second phase of the project will be completed by the end of 2015.

The company said that in the next few days its TAG Pipelines unit would establish the financial and legal framework for the project.

In late September, only one bidder - a consortia formed by Spanish gas distributor Enagas and French energy firm GDF Suez - made an offer on the second phase of the 2.1 billion cubic feet per day Ramones pipeline project.

The pipeline's second phase was expected to cover 460 miles (740 kilometers) spanning five northern-central Mexican states, and help the country satisfy growing demand with cheap gas imports from the United States.

The project also envisioned compression, metering and regulation stations along the route, as well as a new control center.

The failure to award the contract will put in jeopardy the Mexican government's goal of significantly boosting gas imports from Mexico's northern neighbor by next year, said Miriam Grunstein, an energy specialist with Mexico City-based research institute CIDE.

"It also calls into question the conditions of Mexico's national gas industry, particularly downstream, and the commercial viability of projects like this one," said Grunstein.

Pemex has frequently called the $3.3 billion Ramones pipeline project its biggest energy infrastructure investment in 40 years. If completed, the project would eventually supply a fifth of the country's total natural gas demand.

The first phase of the pipeline, running from the U.S.-Mexico border to the town of Los Ramones about 75 miles (120 km) east of the industrial city of Monterrey, is expected to be operating by the end of 2014.

IEnova, previously known as Sempra Mexico, is developing the first phase of the project with a Pemex subsidiary. Once both phases are completed, the Ramones pipeline will extend 750 miles (1,200 km) from Agua Dulce, Texas, across the border and deep into central Mexico's industrial heartland.

Agua Dulce is located near the booming Eagle Ford shale gas play in southern Texas.

Pemex has said the project would boost natural gas import capacity to about 3.4 bcf per day from about 1.4 bcf per day at present.

While Mexico's energy sector is dominated by Pemex, the country has been open to private companies in the transportation of gas for the past 18 years.

Since 1995, Mexico's gas pipeline infrastructure has grown by nearly 1,112 miles (1,790 km), or nearly 20 percent, on investment of $2 billion, according to Pemex data.

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